SMART Global Holdings(US:SGH)2023-10-13 00:06Financial Data and Key Metrics Changes - Total sales for fiscal 2023 reached $1.44 billion, a 3% increase from $1.4 billion in fiscal 2022, driven by strong growth in the IPS segment despite headwinds in memory and LED segments [107] - Non-GAAP gross margins improved to 31.7% in fiscal 2023, up from 29.2% in fiscal 2022, marking a record for the company [77][109] - Non-GAAP diluted earnings per share for fiscal 2023 were $2.52, down from $2.65 in fiscal 2022 [109] Business Line Data and Key Metrics Changes - IPS sales totaled $145 million in Q4, representing 46% of total sales, with services revenue contributing 19% of total revenue [85] - Specialty Memory revenue was $105 million in Q4, accounting for 33% of total sales, remaining flat compared to the previous quarter [90] - LED Solutions generated $66 million in Q4, up 3% sequentially, representing 21% of overall sales [97] Market Data and Key Metrics Changes - The consumer memory market has seen a dramatic decline in demand, impacting sales forecasts for Brazil, which were lower than anticipated [8][10] - Elevated inventory levels among key customers have affected buying patterns in the memory segment, leading to challenges in forecasting [91] Company Strategy and Development Direction - The company is transitioning from a memory module provider to an enterprise solutions company, focusing on high-performance and high-availability solutions [72][74] - The acquisition of Stratus Technologies has expanded the IPS offerings and added significant high-margin recurring services revenue [73] - The divestiture of SMART Brazil is aimed at aligning resources towards developing high-performance enterprise solutions [74] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term potential in AI and advanced computing, indicating a focus on customer engagement and deployment of AI solutions [3][19] - The company anticipates that IPS revenue will be weighted towards the second half of fiscal 2024 due to current visibility challenges [89][66] - Management noted that while memory pricing is stabilizing, demand remains lower than expected, with inventory burn-off expected in the coming quarters [11][39] Other Important Information - The company reported a strong balance sheet with cash and short-term investments totaling $391 million at the end of Q4 [124] - The anticipated completion of the sale of 81% of SMART Brazil operations is expected by the end of calendar 2023 or early 2024 [65][100] Q&A Session Summary Question: What would the top and bottom line results and guidance have looked like if Brazil was included? - Brazil represented $30 million in actual sales for Q4, but sales were lower than anticipated, impacting overall guidance [7][8] Question: What is the outlook for memory and IPS in the upcoming quarters? - Management indicated that memory revenues are expected to be down sequentially due to market softness and inventory levels, while IPS may also see a decline [126][127] Question: Can you provide new targets for long-term gross margin excluding SMART Brazil? - Long-term margin expectations have not been outlined yet, but the company has been running above 30% margin levels recently [42][44] Question: What is the expected impact of CXL on future revenue? - CXL revenue is expected to ramp up more significantly in fiscal 2025 and 2026, with initial products being released this year [45][48]